Pyongyang says Kaesong shutdown a 'declaration of war' as Seoul cuts off power and water

North Korea says it was "kicking out" all South Koreans from the jointly run industrial zone and designates Kaesong as a 'military zone'.

South Korea disconnected water and power supply to Kaesong industrial park inside North Korea and said it will cut two key diplomatic hotline numbers to Pyongyang amid rising tensions in the Korean peninsula over a recent rocket launch.

The two countries, technically at war with each other, also traded accusations over the closure of the joint industrial complex, which has been the only surviving symbol of peace between the two countries.

South Korea closed the complex on Wednesday and started pulling out its staff saying the closure was "unavoidable" as Pyongyang used income from the complex for funding its nuclear and ballistic missile programme.

Pyongyang ratcheted up the rhetoric saying the shutdown was "a declaration of war" and that it was "kicking out" all South Koreans from the jointly run industrial zone. Pyongyang also designated Kaesong as a 'military zone'.

North Korea also said it will seize the assets of South Korean companies in Kaesong.

South Korea's Unification Ministry said late Thursday night all of its citizens have vacated the zone. A few minutes before midnight, the water supply and electricity lines into Kaesong factory zone were cut off, the ministry said, according to Reuters.

The complex, which has more than 120 South Korean factories in it, produced around $500 million of goods in 2015, making it the biggest single contributor to inter-Korean trade.

It is a major source for revenue for the impoverished North. South Korean companies pay about $100 million in wages to North Korean workers every year. The closure will directly affect about 200,000 North Korean workers, it has been estimated.

"The shutdown will impact the country's economy. The Kaesong complex earnings roughly equal the amount five foreign-currency-earning entities would bring in every year," said a North Korean defector who works with the Institute for National Security Strategy in Seoul, according to the Voice of America.